So Congress finally got something done.
In Washington, they're taking a short break from lobbing spitballs to celebrate the passage of the Jumpstart Our Business Startups Act, which might take the prize for the worst bill title ever, except in that it forms the nifty acronym JOBS. This is not to be confused with the 2011 American Jobs Act, which was a grab bag of measures sponsored by President Obama that had no chance of passing in Congress. So that bill died and made room for this one.
The 2012 JOBS Act is a modest piece of legislation that won't affect most Americans, which is probably why it garnered bipartisan support. The goal is to relax the rules for certain companies with less than $1 billion in revenue and make it easier for them to grow. It won't affect big companies that are already publicly owned or small mom-and-pop outfits. But it provides some breaks for the types of companies that account for the majority of new jobs in the U.S. economy: fast-growing firms looking to raise capital, including many that have the hopes of going public.
Consumer advocates worry that looser rules on raising funds could lead to more fraud. But most business experts seem to think the JOBS Act might do a bit of good. Still, it propagates a few misperceptions that politicians seem to have about business. Here are three myths contained in the JOBS Act:
Excessive regulation is strangling business. For businesses designated as "emerging growth companies," the JOBS Act will relax certain provisions of the 2003 Sarbanes-Oxley reforms, which were meant to prevent the kind of accounting fraud perpetrated by WorldCom and Enron. Businesses dislike Sarbanes-Oxley, which by some estimates costs big companies $1 million per year in compliance costs. But business leaders mostly describe it as a nuisance, not as the job-killing regulatory stranglehold that some politicians characterize it as.
In surveys conducted by the National Independent Federation of Independent Business, an anti-regulation lobbying group, the top economic concern cited by business owners has consistently been poor sales. Concern about excessive red tape has been growing, and is now tied with taxes among business concerns. But that may overstate the extent to which Washington can pull levers that will make businesses healthier.
"Sarbanes-Oxley is a red herring," says Andy Rachleff, a former Silicon Valley venture capitalist who's now CEO of Wealthpoint, an investing startup. "None of us like it, but I run a 20-person company, and it never enters our thinking. It's just a way for politicians to look like they're helping small companies."
Startups need help going public. It was tough sledding for many startups during the recession, when capital was scarce and few investors wanted to take risks. But venture capital and other types of funding are flowing again, leading to high-profile public offerings for companies like Groupon, LinkedIn and Zynga. In its most recent quarterly report on public offerings, consulting firm PwC said that the IPO market has shown "significant strength" in 2012, with the highest volume of IPOs since 2007. The forthcoming Facebook IPO could be the biggest ever, and many others are in the pipeline. These don't seem like the types of firms that need an assist from Washington.
One provision of the JOBS Act would make it easier for startups to do "crowdfunding," which means raising small sums of money from a lot of individual investors, often through websites like Kickstarter. That may help a few companies inclined to try something new—not to mention the crowdfunding sites—but most businesses would probably benefit more from better access to old-fashioned bank loans, which are still hard to get. "The best answer would be making credit more available through traditional channels," says Rachleff.
Bipartisanship is back. Eric Cantor, the No. 2 Republican in the House of Representatives, showed up at the White House to watch President Obama sign the JOBS Act and tease naïve onlookers with the idea that the two parties will work together for the foreseeable future. That's highly doubtful.
The JOBS Act allows both parties to cite friendly-sounding legislation during an election year, without having to make any tough decisions. That's why Democrats and Republicans both supported it. But there are highly divisive battles coming on taxes, spending, Medicare, another increase in the debt ceiling, and of course, Obamacare. The JOBS Act, in fact, may represent the last bit of bonhomie in Washington for a good long while.
Watch out for spitballs.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success, to be published in May. Follow him on Twitter: @rickjnewman.